TOP NEWS

Friday, April 25, 2008

Interview with Ophir Tanz, GumGum

Story by Benjamin F. Kuo

Online publishers often have difficulty paying for an locating the right photos for their sites, because of an industry which has been--so far--structured and priced mostly for the offline, "dead tree" magazine and newspaper world. Plus, photographers and their agencies often find sites are pirating photos, and that they don't have a way to get their photos to those publishers. To solve that problem, Santa Monica-based GumGum (www.gumgum.com) recently began offering entertainment and other photos to blog and other online publisher on a CPM basis. We spoke with Ophir Tanz, the firm's CEO and Founder, about what the company is up to, as well to get the details on a recent (unannounced) additional angel round of funding.

For those folks not familiar with GumGum, tell us how your service works?

Ophir Tanz: GumGum is a content licensing platform. Our purpose is to solve the content licensing problem on the Internet. The problem is that, in the offline world, content is licensed for a finite period of time and to a predictable audience. If you're Time Magazine, with four million readers, and are going to be on a newsstand for a week, publishers and content-owners are able to use these parameters to set license prices. That is effectively how, in the offline world, license prices are estimated. On the Internet, the problem is those media licenses are forever, and the usage is unknown. For example, in five years, you might Google "paris hilton, katana" and you’ll come across a five year old Perez Hilton post with a photo of Paris Hilton walking out of Katana. That might be adding lots of value to your post and page, and what has happened is Perez Hilton has monetized that page view. This image is adding a good deal of value to the post and Perez has monetized your page view. The problem here is that the content owner has received nothing for the page view. That's what's what we mean when we talk about Internet media usage being forever and usage unknown.

The publisher will be generating revenue from that content forever, but a content owner doesn't know what it's generating, and moreover can't monetize that. Our solution is to effectively bill publishers on a per-use basis while enabling content-owners to more easily track, distribute, and monetize their content. By content, I am referring to photos, right now, and soon video, audio, and text as well. We track and monetize every single view that a piece of content receives. We do this in two ways. One is we allow content-partners to upload a photograph, specify metadata and set a CPM. That CPM is the rate at which publishers license content. Every time the image is viewed the publisher pays a fractional amount out pocket for that view.

The other way we are able to license the media, is for free. We do this by displaying an ad alongside the content thereby monetizing the license with the associated ad revenue. An ad tastefully appears at the bottom of an image and content owners are compensated from advertisers. Publishers also receive a share of the ad-revenue.

Why would someone want to use this, instead of something like Corbis or Getty?

Ophir Tanz: We launched about a month and a half ago, and already, we have about a million photos in our marketplace. We've been very well received by the industry. To date, we have been focusing all of our business development efforts on entertainment photography and the paparazzi market. This has been for strategic reasons – it is currently the market the most time-sensitive, high-value and high-demand photography. Our content partners include Splash News, Pacific News, and X17, the biggest entertainment agencies in the world.

We come with a big value proposition. At some level, everyone agrees that the one time fee model on the Internet makes no sense. At the end of the day, the publishers are not capturing any of the long tail value. We also protect media in a way that it's never been protected before. With our system, you can't right click on an object to save it--it will tell you the image is copyright Splash News, for example, and give you the option to license the image. This makes every photo a viral marketing tool. We've also built some fairly complex authentication technology -- that's what enables us to actually have a pay-per-use model to begin with. When a given publisher goes to license media through GumGum, they specify which domain they will be using with that license. We authenticate against this domain at load-time. This means you can't hotlink to publisher’s images. You'll receive an access denied notification. We do a lot around protecting photos. This shouldn't be confused with the typical DRM that comes to mind, however, as we're not affecting the user experience. A user is able to do exactly what they expect to be able to do--the photo is same as if it were a clean JPG, but our version provides some protection against pirates.

We track the use of photos across the Internet, including views received. We show, much like an advertising network, repeat versus unique views and other relevant information. This enables content owners to get surgical with their analytics and understand where and how their content is being consumed. Most importantly, we are offering a payment model that makes lots of sense. There are tremendous inefficiencies in the market – so much so that a huge percentage publishers are being blocked out. There are lots of publishers who are just too small--they don't have enough money to be paying $100, $200, or $300 for a license, and licensing 40 images a day. The result is that the market is smaller than it could be. People are either discouraged from starting a blog or they pirate content. Usage-based models eliminate the capital-intensive barriers to entry that publishers experience. Maybe you can't spend a thousand dollars a day on photography, but if you pay exactly for what you are consuming, in such a way that the revenue you are generating vastly trumps the cost for licensing that media, you can eliminate the barrier to entry.

We have a self-service system that enables publishers to easily locate and license the content that is relevant to them. Currently, what you see in the market is tremendous energy spent on behind-the-scene negotiations -- all of which are messy and time consuming for everyone involved. Our value proposition is significant because we eliminate a huge amount of friction from the process.

So how did you start GumGum, and what's your background?

Ophir Tanz: It's interesting. I'm not from this industry, although my partner Ari has some experience--he ran an epicurean magazine called EATING Magazine, so he has more experience in the publishing industry, but really, neither of us native to it. We joke with photo industry veterans that we are now friends with that we likely wouldn't have tried to solve this problem if we'd known what we were getting ourselves into. Sometimes that can be a good thing!

The last company I started was called Mojungle. I started that with Ari as well. It was a mobile media-sharing platform that allowed you to capture media with your cell phone and use SMS and MMS messaging to send it to your personal widget online. It was kind of like a Twitter with rich media. We sold that in February of last year to Shozu.com.

After we sold the company, we became interested in the content licensing problem. What really alerted us to the problem, was Perez Hilton being sued by everybody. It was all across the news. We were interested in why this was happening, and tried to understand how content licensing works on the Internet. In this research process, we were baffled and surprised at how terrible and inefficient the process was. The original idea behind GumGum centered around protecting photos, but quickly became how to best monetize content. At its core it is a philosophical question. Our belief is everything will go pay-per-use. Web hosting will go pay-per-use, like Amazon Web Services; we believe things like content licensing will go pay-per-use as well. It just makes sense. As you consume things, you pay for them. We also have a strong belief that almost everything non-pay-per-use will go ad-supported – a trend that has been growing on the Internet for a long time. There's a place for both of those models on the Internet. On one hand, the New York Times or the LA Times will never be keen to allow a 3rd party to display ads on their real estate so they will use pay-per-use. On the other hand, a medium sized blogger might not want people to see ads on their home page, but like Google Adwords, we can allow them to set a budget and use hybrid licensing models. For example, they can use pay-per-use for a specified period of time, and if they go over budget, switch to ad-overlay. It's really the combination of the two technologies that is the power behind GumGum. It makes for a strong value proposition.

Let's talk a little about your funding--I understand you've just raised some more angel investment?

Ophir Tanz: We thought of the idea and thought it was a good idea and since we had just sold a company we had some cash. Ari and I threw in $50,000 ourselves, to see where we could take it. Very soon after that, we raised two angel rounds. In total, we've raised $300,000 for the company to date. We're currently doing our Series A and have a term sheet on the table. We have a strong advisory board. Michael Jones (Editor's note: Founder of Userplane and now at AOL) is on our advisory board. He's tremendously talented, and has been instrumental to our strategy and helpful with our growth from an operational perspective. David Sacks, one of the PayPal guys, is also on our advisory board. He's the CEO of Geni and provides strong strategic firepower. We've been meeting with, and are being tracked by, many of VCs up North, as well as in Los Angeles. We're going to do our next raise in the next two months.

What's your next goal, beyond fundraising?

Ophir Tanz: We have a few big goals. We want to expand to video, and offer a sensible video licensing solution. We're also expanding to article and text licensing. We are working on developing an API so that anyone can leverage our tracking, distribution, and monetization technology. FFor example, if a Getty or a big aggregator wanted to use GumGum, but didn't want to go through our interface, they could maintain their brand as well as their own marketing and web site. We liken ourselves to the PayPal of content licensing. We have a checkout solution that people are able to seamlessly use to license content. Our other goal is to hit a billion page views a month. I think we're on track to do that. We think we'll reach that goal by 2009, if not before. This kind of scale affords a good deal of opportunity from an advertising perspective and will enable us to really grow this thing.